Employers can make arrangements with HMRC to payroll benefits in kind. This means that benefits in kind and expenses would be put through the payroll for employees. The employees would then be taxed in ‘real time’ rather than be taxed at some future time via their PAYE tax code or if applicable through their self assessment form.

In practice the cash equivalent of the benefit in kind would be calculated on an annual basis and split over 12 months if employee paid monthly or 52 weeks if paid weekly and the appropriate amount added to the payroll.

This can be done for all benefit in kinds or the employer can choose specific benefits to be payrolled which can be agreed with HMRC.

Employers making payrolled benefits still need to complete and submit P11d forms and will be liable to penalties if forms not submitted. Detailed below is an extract from HMRC on the steps to take when submitting forms - HMRC - P11d forms

If all benefits have been payrolled and P11ds filed online.

1. notify HMRC that you will be sending P11Ds for directors or employees where payrolling has taken place in that year, in order to avoid incorrect processing of the data - there's an HMRC online form payrolled benefits you can use to do this or you can telephone HMRC's Employer Helpline.
2. complete the 'amount made good or from which tax deducted' boxes (where this box is available for the relevant benefit).
3. complete the P11D(b) form as normal, ensuring that the total expenses and benefits provided are included irrespective of payrolling.

If some benefits have been payrolled for some or all employees and P11ds filed online.

1. complete the 'amount made good or from which tax deducted' boxes (where this box is available for the relevant benefit).
2. submit P11D information, either online/electronically or on paper for non-payrolled benefits.
3. submit P11D information, either online/electronically or on paper for payrolled benefits, where the benefits that have been payrolled have a corresponding entry for 'amount made good or from which tax deducted'.
4. submit separately on paper, P11D information for other payrolled benefits - these separate P11Ds and lists must be clearlymarked 'PAYROLLED' .
5. complete the P11D(b) as normal, ensuring that the total expenses and benefits provided are included, irrespective of payrolling .

Benefits have been payrolled for some employees and paper P11ds.

1. clearly mark all relevant paper submissions 'PAYROLLED', whether they be individual P11Ds or in list format .
2. complete the P11D(b) as normal, ensuring that the total expenses and benefits are included, irrespective of payrolling .

Please contact us if you require any further advice on payrolling benefits in future or completing p11d forms.